Plantronics 2007 Annual Report Download - page 79

part ii
75A R 2 0 0 7
Fiscal Year Ended March 31,
(in thousands, except per share data) 2005 2006
Net income—as reported $ 97,520 $ 81,150
Add stock-based employee compensation expense included in net income,
net of tax 121 748
Less stock-based compensation expense determined under fair value-based
method, net of tax (35,278) (11,967)
Net income—pro forma $ 62,363 $ 69,931
Basic net income per share—as reported $ 2.02 $ 1.72
Basic net income per share—pro forma $ 1.29 $ 1.48
Diluted net income per share—as reported $ 1.92 $ 1.66
Diluted net income per share—pro forma $ 1.23 $ 1.43
On March 8, 2005, the Company accelerated the vesting of certain unvested and “out-of-the-money”
stock options outstanding under the Company’s stock plans that have exercise prices per share of $38.19
or higher. Options to purchase approximately 1.5 million shares of the Company’s common stock became
fully vested and exercisable immediately. In addition, in order to prevent unintended personal benefits to
executive officers and directors, restrictions were imposed on any shares received through the exercise of
accelerated options held by those individuals. Those restrictions will prevent the sale of any shares received
from the exercise of an accelerated option prior to the earlier of the original vesting date of the option or
the individual’s termination of employment.
The Company believed that the acceleration of the vesting was in the best interest of stockholders as it
enabled the Company to avoid recognizing in its statement of operations compensation expense associated
with the options in future periods, upon the Company’s adoption of SFAS No. 123(R) in the first quarter
of fiscal 2007.
Concentration of Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist
principally of cash equivalents, short-term securities and trade receivables. Plantronics’ investment
policies for cash limit investments to those that are short-term and low risk and also limit the amount of
credit exposure to any one issuer and restrict placement of these investments to issuers evaluated as
creditworthy. Cash equivalents have a maturity when purchased, of three months or less; short-term
securities have a maturity, when purchased, of greater than three months. Concentrations of credit risk
with respect to trade receivables are generally limited due to the large number of customers that comprise
the Company’s customer base and their dispersion across different geographies and markets. Plantronics
performs ongoing credit evaluations of its customers’ financial condition and generally requires no
collateral from its customers. The Company maintains an allowance for uncollectible accounts receivable
based upon expected collectibility of all accounts receivable.
Certain components that meet the Company’s requirements are available only from a limited number of
suppliers. The rapid rate of technological change and the necessity of developing and manufacturing
products with short lifecycles may intensify these risks. The inability to obtain components as required,
or to develop alternative sources, as required in the future, could result in delays or reductions in product
shipments, which in turn could have a material adverse effect on the Company’s business, financial
condition, results of operations and cash flows.